Absolute and Relative Poverty: The 'Dogma' of Economic Equality
On Friday April 11, the Vatican newspaper, L’Osservatore Romano, featured a front-page article on the progress made in international development since Pope Paul VI wrote the encyclical Populorum Progressio in 1967. The author of the article, Fr. Gian Paolo Salvini, S.J., is director of the journal La Civiltà Cattolica. He has a degree in economics and since he has lived in Brazil for many years, he has first-hand experience of development issues.
Salvini’s article is entitled “Incomplete Development” (“Uno sviluppo incompleto”) but his overall assessment of what has happened over the last 40 years is positive. He cites various statistics showing that “spectacular progress” has been made in terms of reducing absolute poverty. The number of people who have to live on less than one dollar a day has fallen from 29 to 18 per cent between 1990 and 2004. Also the data for longevity, child mortality and literacy show clear improvements.
Salvini identifies international trade as one of the key factors that has contributed to this trend. He is aware that progress has been uneven and that improvements in Asia have been far more marked than in Africa. This highlights that “the greatest success stories are due to the formula industrialize for exports”.
His most striking example to illustrate this point is that of South Korea. The fact that the country’s economic indicators were similar to those of Zaire (today the Democratic Republic of Congo) in the 1960s reflects the central importance of engaging with international trade: Korea’s achievement is largely due to its ability to export its manufacturing products to North America and Europe. This also explains why Dependency Theory, which was fashionable in the sixties and which advised developing countries to disengage with global trade, “is not taught anymore”.
The power of trade to transform poor countries is nowadays beyond doubt and Salvini notes that today it is often “the developing world which is asking for more free trade”, whereas Europe and the United States are obstructing the free flow of goods in agriculture.
But towards the end of the article, Salvini raises a more critical point regarding achievements in international development. He says that in contrast to absolute poverty, relative poverty is increasing: “The distance between those who are doing well and those doing badly, or to put it better, those who are doing well and those who are doing less well is growing.”
Salvini does not provide any data to illustrate this point and his assertion is, in fact, questionable. At the Populorum Progressio conference organized by Istituto Acton in Rome in February, Prof. Philip Booth from the Institute of Economic Affairs in London, specifically addressed the issue of relative poverty:
Salvini may be referring to an increase in income inequality within countries but in that case he is not looking at poverty in terms of human needs and real deprivations, but as compared to an abstract “ideal”.
Reducing income inequality may seem like a noble aspiration, but it is of minor importance. Prioritizing the alleviation of relative poverty would yield the absurd situation where society as a whole is made poorer only to make it more equal. A desire for greater equality should not justify giving up the real and tangible benefits globalization has brought the poor over the last couple of decades.
Salvini’s article is entitled “Incomplete Development” (“Uno sviluppo incompleto”) but his overall assessment of what has happened over the last 40 years is positive. He cites various statistics showing that “spectacular progress” has been made in terms of reducing absolute poverty. The number of people who have to live on less than one dollar a day has fallen from 29 to 18 per cent between 1990 and 2004. Also the data for longevity, child mortality and literacy show clear improvements.
Salvini identifies international trade as one of the key factors that has contributed to this trend. He is aware that progress has been uneven and that improvements in Asia have been far more marked than in Africa. This highlights that “the greatest success stories are due to the formula industrialize for exports”.
His most striking example to illustrate this point is that of South Korea. The fact that the country’s economic indicators were similar to those of Zaire (today the Democratic Republic of Congo) in the 1960s reflects the central importance of engaging with international trade: Korea’s achievement is largely due to its ability to export its manufacturing products to North America and Europe. This also explains why Dependency Theory, which was fashionable in the sixties and which advised developing countries to disengage with global trade, “is not taught anymore”.
The power of trade to transform poor countries is nowadays beyond doubt and Salvini notes that today it is often “the developing world which is asking for more free trade”, whereas Europe and the United States are obstructing the free flow of goods in agriculture.
But towards the end of the article, Salvini raises a more critical point regarding achievements in international development. He says that in contrast to absolute poverty, relative poverty is increasing: “The distance between those who are doing well and those doing badly, or to put it better, those who are doing well and those who are doing less well is growing.”
Salvini does not provide any data to illustrate this point and his assertion is, in fact, questionable. At the Populorum Progressio conference organized by Istituto Acton in Rome in February, Prof. Philip Booth from the Institute of Economic Affairs in London, specifically addressed the issue of relative poverty:
We should recognise that relative poverty has decreased during the process of globalisation .… Most dramatically, the gap between countries that have recently seen rapid growth and those countries that have been relatively well off for many decades has narrowed significantly … Whilst European Union countries, the US, the UK and Japan grow well below the world average (indeed disposable incomes are broadly stagnant across much of the developed world), over half the world’s population now lives in 40 countries that are growing at more than 7% per year. Development is happening and is benefiting huge numbers of previously-poor people.
Salvini may be referring to an increase in income inequality within countries but in that case he is not looking at poverty in terms of human needs and real deprivations, but as compared to an abstract “ideal”.
Reducing income inequality may seem like a noble aspiration, but it is of minor importance. Prioritizing the alleviation of relative poverty would yield the absurd situation where society as a whole is made poorer only to make it more equal. A desire for greater equality should not justify giving up the real and tangible benefits globalization has brought the poor over the last couple of decades.
Comments
#1 2008-04-14 15:14 (Reply)
Not buying “real and tangible” until you define the terms (currency deposited over what time frame) so I can “take it to the bank”?
“The number of people who have to live on less than one dollar a day has fallen from 29 to 18 per cent between 1990 and 2004.”
Not sure whether this is good news or not, since statistics can lie. The FOREX exchange value of a dollar has fallen in that time period. So one would expect a smaller number of people qualify for living beneath its lower value, right? No net gain there!!
I think Acton would do well to analyze what “$37,831 circulated in 2005 for every troy ounce of gold held by the United States when gold was worth only about $500” and consider the implications of our inflationary FIAT federal note currency. How safe are we at 1/80 leveraging of capital reserves?
Are people going to starve like the leaders at the IMF and WorldBank say they are?
And why? How complicit have we been in encouraging a voracious greed for credit by robbing entrepreneurs of their natural profits (our command economy of central bank interest rates that undercut the market STEALS any incentive to risk capital in production since borrowed money is cheaper than working capital under inflation)
These amateur attempts to persuade folks of the “inherent virtues” of a means (the free markets) to an end (a vigorous and virtuous man), instead of studying the means to measure the application of virtue (what juridical basis is assured in law for currency values, aka credit inflation by central banks is theft, for example)
Even the Pope’s Palm Sunday homily noted the corrupt law that so offended Jesus when he expelled the “speluncam latronum” from the temple.
(Read Jesus de Soto’s footnote 33 in Chapter 2 of his book “Money, Bank Credit, and Economic Cycles” for his affirmation on this reading of Holy Writ)
Acton would do well to dwell on the Pope’s denouncing of the dictatorship of relativism before claiming the absolute truth on relative poverty... and study Fr. Dempsey’s analysis of fractional reserve banking as a form of institutional usury...
Until then so much of what appears here is a “ringing bells and clanging symbols” Calvinism, a false prosperity a la Smith’s invisible hand...
Liberty demands responsibility, can we deliver?
#1.1 2008-04-16 17:07 (Reply)
The comments on the article seem too clever by half. I suggest reading MENSA magazine’s April ‘91 cover story on free trade for an analysis of the forest, rather than individual twigs.
#2 2008-04-14 16:53 (Reply)
Meadowcroft in MandM says: “To suggest that prices should not be attached to environmental resources is to negate the fact that conservation involves benefits and costs. It is imperative, however, that prices arise out of the heuristic exchange of property titles in the marketplace and are not simply arbitrarily attached by politicians or bureaucrats.”
Where do we stand when the dollar’s value is so closely tied to petroleum prices (no titles there, only a stream of public income from mining rights) controlled by 85% nationalized production under command economies of OPEC countries. Meanwhile our only “moral” agency is our vote for an adminstration who may have the privilege to nominate Governors to the Fed who arbitrarily attach prices (interest on money) and they’re NOT even a politician or a bureaucrat - they operate for the gain of their private member banks and can cause money to be printed out of thin air by dictate of FIAT??????
I want to know what’s “absolute” about that? It seems like a pretty clear example of “relativism” and a very good example of “tyranny” to me... and the most vulnerable are continuing to suffer ...
#2.1 2008-04-18 11:40 (Reply)
Dear Friends,
I am imagining that the following questions are rhetorical ones to many people in the Acton Institute community.
“Why are politicians and skeptics so willing to risk their future and everyone else’s future on blindly clinging to a course of action that has a high probability of leading to a seriously crippled future? If you even suspect that global warming represents a serious risk to your survival (and we have far more than suspicion these days), why wouldn’t you do everything protect and conserve your planet?”
It would please me to hear from others; but from my humble perspective the “answers” to these questions are all-too-obvious.
The leaders in my generation of elders wish to live without having to accept limits to growth of seemingly endless economic globalization, of increasing per capita consumption and skyrocketing human population numbers; our desires are evidently insatiable. We choose to believe anything that is politically convenient, economically expedient and socially agreeable; our way of life is not negotiable. We dare anyone to question our values or behaviors.
We religiously promote our shared fantasies of endless economic growth and soon to be unsustainable overconsumption, overproduction oand overpopulation activities, and in so doing deny that Earth has limited resources upon which the survival of life as we know it depends.
My not-so-great generation appears to be doing a disservice to everything and everyone but ourselves. We are the “what’s in it for me?” generation. We demonstrate precious little regard for the maintenance of the integrity of Earth; shallow willingness to actually protect the environment from crippling degradation; lack of serious consideration for the preservation of biodiversity, wilderness, and a good enough future for our children and coming generations; and no appreciation of the understanding that we are no more or less than human beings with “feet of clay.”
We live idolatrously in a soon to be unsustainable way in our planetary home and are proud of it, thank you very much. Certainly, we will “have our cake and eat it, too.” We will fly around in thousands of private jets, own fleets of cars, live in McMansions, exchange secret handshakes, go to our exclusive clubs and distant hideouts, and risk nothing of value to us. Please do not bother us with the problems of the world. We choose not to hear, see or speak of them. We are the economic powerbrokers, their bought-and-paid-for politicians and the many minions in the mass media. We hold most of the Earth’s wealth and control the power it purchases. If left to our own devices, we will continue in the exercise of our ‘rights’ to ravenously consume Earth’s limited resources; to expand economic globalization unto every corner of our natural world and, guess what, beyond; to encourage the unbridled growth of the human species so that where there are now 6+ billion people, by 2050 we will have 9+ billion members of the human community and, guess what, even more people, perhaps billions more in the distant future, if that is what we desire.
We are the reigning, self-proclaimed masters of the universe. We have no regard for human limits or Earth’s limitations, thank you very much. We are idolaters of the global political economy. Please understand that we do not want anyone to present us with scientific evidence that we could be living unsustainably in an artificially designed, temporary world of our own making…… a manmade world filling up with distinctly human enterprises which appear to be approaching a point in human history when global consumption, production and propagation activities of the human species become unsustainable on the tiny planet God has blessed us to inhabit........and not to overwhelm, I suppose.
Sincerely,
Steve
#3 2008-04-18 16:16 (Reply)
great post! thanks very much for sharing